A Comprehensive Guide to Mortgages in Valencia: How to Buy a Flat in Spain

One of the advantages of Spanish residency is the opportunity to obtain a mortgage on far more favorable terms than those available to non-residents. In an overheated Spanish property market, any reduction in the interest rate or down payment can make a difference. La Cotorra explains how mortgages work in Valencia and Spain in general, which nuances to consider, and what options exist to secure advantageous lending terms.

Prices are rising, interest rates are falling

Property prices in Valencia have been rising for almost ten years, and in the past year alone they have increased by 15–20 per cent. According to Tinsa — Spain’s leading independent property valuation company — the average price per square meter in the capital of the Valencian Community reached €2,358 in the first quarter of 2025. At this rate, prices are close to the 2008 peak of €2,417 per square meter. Meanwhile, according to Idealista, the largest property sales platform, prices have already exceeded that benchmark: in April 2025 the average price reached €2,992 per square metre. Both links provide detailed information by district.

The final mortgage rate depends heavily on the specific agreement offered, but the Bank of Spain provides an average market reference: each month the regulator publishes the average interest rate applied to mortgages issued by Spanish banks. As of April, the average mortgage rate was slightly above 2.8 per cent annually.

In 2021, the average rate stood at 1.4–1.5 per cent, but inflation in the eurozone surged in 2022, which caused the ECB’s key interest rate and the Euribor (the interbank rate used in calculating variable-rate mortgages) to rise sharply. Mortgage costs climbed above 3 per cent in 2022 and passed 4 per cent in 2023. As inflation began to cool, housing loans became cheaper: in the second half of 2023 and throughout 2024, rates declined gradually. In the first four months of 2025 the trend is less clear, with rates fluctuating around 2.8–2.9 per cent annually. The Bank of Spain forecasts — inflation at 2.5 per cent in 2025, falling to 1.7 per cent in 2026 and rising again to 2.4 per cent in 2027.

Mortgages in Valencia: types and benefits

In Spain, mortgages are available in three forms: fixed-rate, variable-rate and mixed-rate.

• Fixed-rate: the monthly payment remains unchanged for the entire term. On the one hand, you are protected from inflation spikes. On the other, banks build in their own risk: fixed rates are usually higher — than variable ones at the moment of signing. Early repayment is also more expensive.
• Variable-rate: the payment consists of a changing index (usually the Euribor, which on 30 May stood at 2.09 per cent) plus a fixed percentage set by the bank. This often means lower initial payments than with a fixed-rate mortgage. Afterwards it depends on the Euribor: if it falls, payments fall; if it rises, payments rise. Variable-rate mortgages used to be the standard in Spain, because the Euribor declined steadily from late 2011 and even entered negative territory. The shock of 2022 was therefore severe: within eighteen months Euribor jumped from –0.48 per cent to 4.15 per cent. That spike is now behind us, but no one can guarantee future stability.
• Mixed-rate: for the first three to ten years the rate is fixed; afterwards it becomes tied to Euribor. This option suits people who plan to repay the mortgage early, because mixed-rate mortgages often have lower initial fixed rates — than fully fixed ones.

How to reduce the mortgage rate

Banks may offer reduced rates if you purchase additional products from them. Common options include:

• receiving your salary into an account at that bank;
• purchasing home, life or payment insurance;
• obtaining additional credit or debit cards;
• opening a savings deposit;
• subscribing to a pension plan;
• purchasing the bank’s investment products.

None of these can be imposed, but using several of them at once can reduce the rate by as much as one percentage point, which has a significant effect on monthly payments. However, such offers can become a trap — if the cost of the additional products outweighs the savings on the mortgage. Borrowers therefore need to run their own calculations — based on their specific situation.

Another way to secure favourable terms is to buy a property directly from a bank. After past economic crises, banks accumulated many repossessed properties.

On the one hand, banks are eager to sell these quickly and may offer special conditions: mortgages covering 100 per cent of the property price (no down payment), grace periods on early payments, repayment terms of 30–40 years instead of 20–30, and no need to pay for an external valuation, as it has already been conducted. On the other hand, contrary to popular belief, such properties are not dramatically cheaper — than standard housing, and are often in poor condition, sometimes requiring full renovation. Previous owners may also have left unpaid utility bills.

Government support is available for young buyers (under 35) or families with children under 18 purchasing their first home. The state provides additional guarantees enabling the bank to issue a mortgage for 100 per cent of the property value. Applicants must also meet specific conditions: legal and continuous residence in Spain for at least two years, income not exceeding 4.5 IPREM (€37,800 gross per year) — no property ownership or assets above €100,000, and the value of the property must not exceed €250,000 in Valencia.

Finally, you may hire a mortgage broker to negotiate better terms. This may cost between 1 and 5 per cent of the loan amount (or a fixed €3,000–5,000 fee). In exchange, clients may benefit from lower interest rates, smaller down payments, longer repayment terms or fewer additional products required by the bank.

The procedure and additional costs

The process of obtaining a mortgage in Spain is extensive but not overly complex. It usually includes:

• gathering documents;
• the bank’s preliminary assessment of solvency and issuing pre-approval;
• paying a reservation fee and signing a preliminary contract;
• professional valuation of the property;
• final mortgage approval;
• signing the contract at a notary;
• registering the transaction in official registries.

At the outset, you must ensure that banks are willing to consider your application. Unless you qualify for a zero-down-payment mortgage, it is advisable to have around 30 per cent of the property price in your account: 20 per cent for the down payment and 10 per cent for associated costs (for new builds, an additional 10 per cent VAT applies). Banks will require proof of a stable income of sufficient size. For employees this means a long-term or, ideally, indefinite contract; for freelancers and business owners, proof that the business or autonomo status has generated stable profit for the past two years and has a reliable client base. Monthly loan payments — including the mortgage — must not exceed roughly 30 per cent of income. Banks also typically require that at the end of the mortgage term the borrower is no older than 70–80.

Most banks will ask for:

• dentification (TIE, passport);
• employment history (informe de Vida Laboral, requested at);
• recent payslips or other proof of income;
• recent tax returns (freelancers must also provide VAT returns);
• recent bank statements;
• a nota simple for the property you wish to buy;
• if reserved, the reservation contract (contrato de arras). If the mortgage is not yet approved, it is advisable to include a clause allowing return of the deposit should financing be denied;
• recent statements for all existing loans;
• documents for all your assets;
• the lease contract for your current home and proof of regular payments;
• if divorced, the divorce decree — the bank will check alimony obligations.

Banks will also consult credit bureaux for outstanding debts.

After contacting one or several banks, you will receive a document called FIPRE — general preliminary mortgage conditions offered to all clients. Although specific terms may later change, FIPRE outlines the basic framework: possible interest rates, typical down payment requirements (usually 20 per cent, sometimes 10 per cent, occasionally none), available additional products, their cost and their effect on the loan, as well as estimated fees.

Although FIPRE is preliminary, most negotiations occur at this stage. The two key metrics to examine are TIN and TAE. TIN is the nominal rate; TAE is the effective rate including all additional costs. TAE is the meaningful figure both for understanding the true cost of the mortgage and for comparing offers across banks.

Next, the property must be valued. In most cases the client pays for the valuation, not the bank. Even if the bank claims to cover it, check whether the cost has been embedded into the loan. The valuation is carried out by a professional appraiser recognised by the Bank of Spain and costs from €250, depending on property size, location and access. A bank may recommend its own appraisers, but you are not obliged to use them. However, it is sensible to coordinate, because the bank may disagree with the valuation and request a second opinion; if the second valuation is more favourable to the bank, it will form the basis of the final mortgage offer.

Valuation is crucial because the bank will lend based on it, not on the seller’s asking price. For example, if the listed price is €200,000 but the valuation is €190,000, the bank will calculate the loan on the lower amount, and the buyer must cover the difference. The reverse situation is rare: if the valuation is higher than the asking price, the bank almost always chooses the lower figure.

Once all documents and the valuation are submitted, the application goes to the risk department. If approved, the bank issues the final offer, the FEIN containing all details: loan amount, interest rates, commissions, insurance, repayment conditions, consequences of non-payment and more. FEIN is valid for at least ten days, during which the bank cannot change the terms. You may request as many FEIN offers as you wish and compare them freely.

If you accept the FEIN, you must deposit a small amount to cover administrative procedures. Previously, this could reach 10–12 per cent of the purchase price, but after 2019 most associated costs were shifted to banks. Today, the client pays only for the property valuation and their own copy of the notarial deed (around €50). The bank pays the notarial fee (0.2–0.5 per cent of the mortgage), administrative fees, the mortgage documentation tax IAJD (2 per cent) and registry fees (around €100).

Additional expenses may arise, including small ones (nota simple for €11) and significant ones (the mortgage opening fee, comisión de apertura — 0.1 to 2 per cent of the loan). The bank may also charge for opening and maintaining the account.

After agreeing the final offer, you visit the notary one day before the signing. The notary must confirm that the bank has provided all documents and that the client understands the terms. This service is free. The next day, the buyer, the seller and the bank’s representative sign the mortgage deed and the sale deed. The final step is registering the transaction.

What happens next

Mortgages typically last 20–30 years, during which both personal circumstances and macroeconomic conditions may change. There are mechanisms to adjust the mortgage accordingly.

Amending the conditions (novación): the law allows modification of any clause, including rate type, repayment term or even loan amount. This may protect you in difficult periods or secure better terms if market rates fall. Banks may charge up to 1.5 per cent of the outstanding principal and will require a new valuation.

Changing banks (subrogación): if negotiations with the current bank fail, you may switch to another lender. The new bank usually requires the mortgage to have been active for at least two years. The original bank has fifteen days to make a counter-offer. Switching also involves commissions equivalent to early-repayment fees (for variable-rate mortgages not exceeding 0.25 per cent of the remaining debt in the first three years and 0.15 per cent in the first five; for fixed-rate mortgages up to 2 per cent in the first ten years and up to 1.5 per cent afterwards).

Early repayment — partial or full (amortización parcial o total anticipada): this reduces interest payments, although the bank is entitled to partial compensation. The limits are given above. With partial repayment you may choose to reduce either the monthly payment or the loan term.